As reported in the above-linked article, Red China has now matched Trump dollar-for-dollar with tariffs on American exports in the escalating “trade war.” But now it finds itself critically low on “ammo.” If Trump responds with tariffs on another $50 billion of Chinese imports, Red China will be able to match those tariffs again. But then they’re done. Trump could continue to slap tariffs on $50 billion of Chinese imports eight more times and Red China would be unable to respond because there would be no more American exports to attack. That’s how bad the trade imbalance is and why Red China has such a losing hand.
In spite of Wall Street getting its panties in a wad over this situation, there’s really nothing to fear. So Chinese goods become more expensive. So what? Americans then have a choice. Spend more money to get them or use their money for something else. For example, suppose Apple iPhone X’s go up in price from $1,000 to $1,250. Maybe it’ll be just the catalyst Americans have needed to ponder whether all the money they spend on these gadgets is money well-spent. Given the high cost of the phones and the contracts for data plans, and given that social media has now been exposed as a scheme for mining away your privacy, maybe the money would be better spent on other things, like homes and cars, for example. The point is that less money spent on Chinese imports is money now available for spending on other things. The impact on the U.S. economy will be a positive one – not a negative.
What Trump needs to do is take this trade war to the next level. He needs to apply tariffs across the board to every Chinese import. Beyond that, he needs to take on our other big trade deficits with the likes of the European Union, Japan, Mexico and a few others. Any country that has a sustained trade surplus with the U.S. needs to be in his cross-hairs but, at the same time, he needs to lower barriers for our good trade partners like Canada, Australia, most all of South America, and others. This isn’t a war against trade. It’s a war for balanced trade – a war from which we should never have withdrawn.